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Many bankers and others in the financial industry have watched FATCA and the U.S. government’s efforts to enforce transparency in the banking industry with amazement. Back in 2010, early in the process, it appeared that the U.S. government was running into significant headwinds regarding the implementation of FATCA. At the time, the efforts were strongly criticized not only by those in the banking industry but also by political leaders in many nations as an attack on their national sovereignty. Thus, many people expected FATCA and other U.S. initiatives regarding offshore accounts to be, at best, limited successes.
However, the reality is that the U.S. government has been remarkably successful with FATCA implementation and other offshore enforcement efforts like the Swiss Bank Program. FATCA’s automatic information sharing provisions have gone into effect and more than 100 nations have signed international governmental agreements (IGAs) to implement FATCA. Even nations, like Russia and China, that originally criticized FATCA and the transparency approach have warmed t the idea and are either joining FATCA or unveiling a similar domestic law. A recent guilty plea by a former Swiss banker is yet more evidence of the reach and success of FATCA.
Many individuals believe that leaving the U.S. or never being physically present in the country can protect them from tax-related prosecutions. Unfortunately, this belief is not well-founded and a number of individuals have found themselves facing serious charges despite a lack of time in the United States.
The latest example of the long reach of the U.S. government is the prosecution of former Credit Suisse banker Michele Bergantino. Mr. Bergantino was a banker for Credit Suisse AG on its North American desk who helped Americans conceal foreign accounts from the U.S. government. Mr. Bergantino admitted that from approximately 200 through 2009 that he worked as a relationship manager at the bank. During his tenure, he participated in a conspiracy intended to assist individuals in evading U.S. taxes through the use of Swiss bank accounts.
According to Mr. Bergantino, during this time he came to oversee a portfolio of client accounts valued at roughly $700 million. He states that he had assured clients that Swiss banking laws would protect the secrecy of their account and prevent the bank from disclosing them to the United States. He also admitted to avoiding discussion of business with clients unless they traveled to Zurich to discuss matters in person. He also claims that he would structure withdrawals from accounts and send multiple checks just below $10,000 to clients.
Mr. Bergantino also admitted that he took steps to conceal the fact that the clients were doing business with an overseas branch of Credit Suisse. Mr. Bergantino admitted that he would hold mail for U.S. clients and in one instance he took actions to remove evidence of U.S. ownership of an account to aid and abet a client’s intent to file a false tax return. Bergantino also admitted to traveling with specially prepared client account statements that did not contain Credit Suisse’s corporate logo. He also traveled with business cards that similarly omitted his connections to and employment by Credit Suisse. He stated that upon entry to the United States, he would provide misleading information regarding the nature and purpose of his visit.
Mr. Bergantino is the third banker to face criminal charges for the events and acts stated in the indictment against him. In 2015 Andreas Bachman and Josef Dorig were sentenced to prison for committing similar acts. Mr. Bergantino currently faces the potential for up to five years in federal prison. Any sentence he serves will almost certainly include financial penalties including restitution and fines. Mr. Bergantino has already admitted that the tax loss associated with his conduct is more than $1.5 million.
While Mr. Bergantino will face substantial penalties for his actions, the even more shocking aspect of this prosecution is the relative lack of ties Mr. Bergantino had with the United States. He did not live or work in the United States. While he may have worked with U.S. citizens and taxpayers, the only time he came to the United States was on brief business meetings. This prosecution simply shows the long-reach the U.S. government has when it comes to offshore account enforcement. If you played any role in concealing accounts for Americans, it may be wise to discuss your criminal exposure with an attorney. If you still hold undisclosed foreign accounts, understand that the U.S. government has significant resources committed to identification and prosecution of these types of situations.